NEW DELHI: Prices of 4G smartphones are likely to drop to as low as Rs 3,000 by the year end, making high-speed broadband accessible to more consumers on their handsets and providing the backdrop for the next battle among India’s biggest telecom operators.

The rapid reduction in handset prices is being accompanied by speedy 4G rollouts by market leader Bharti Airtel, followed by rivals Vodafone India and Idea Cellular, in anticipation of a commercial launch of similar services by Mukesh Ambani-owned Reliance Jio Infocomm.

Little-known Chinese handset player Phicomm, this week, became the first handset maker to offer a 4G smartphone for Rs 3,999, including discounts. And that could be bettered shortly, with Micromax Informatics, India’s No. 2 smartphone brand, saying it will launch entry-level 4G phones over the next few months. “Last year this time, cheapest 4G smartphone was available for $120 (Rs 8,000), within a year it’s down to around $55 (Rs 3,650),” said Tarun Pathak, senior analyst at Counterpoint Research. “Prices can drop to $40 (Rs 2,700) by end of 2016.”

The sharp drop in prices is being driven by two factors. First, the prospects of intense competition among operators is prompting handset makers to drop prices to make the most of anticipated demand.

Second, wider adoption of 4G technology and devices in China, Taiwan, Korea, Japan, and other markets offer massive scale for chip manufacturers to produce components at much lower costs, thereby driving down production costs of the handsets.

Samsung is the market leader in India’s 4G smartphone segment, followed by Lenovo, Xiaomi, Micromax and Apple in that order. In an attempt to build up the handset ecosystem in the lead up to Jio’s 4G launch, Reliance Retail — Jio’s sister company — has also launched 4G smartphones under the LYF brand with one phone being sold for less than Rs 5,000. While the initial thought was to flood the market with 4G phones at under Rs 3,000 levels by subsidising the devices, sources say there appears no need to do that now, given the sharp price drops already being witnessed.

“In September 2015, the most economical 4G smartphone cost about Rs 7,000($105); today we believe there are about 15 smartphones that are available for less than Rs 5,000 ($75),” brokerage Kotak said in a recent report. In 2015, 4G devices sold to end users grew about five times to 27.4 million, over 2014."What we saw happening in 3G, devices will also happen in 4G, but at faster scale," Shubhajit Sen, chief marketing officer at Micromax,. Micromax entry level phones begin from Rs 3,500 for 3G smartphones.

Experts say that most of the 4G phones currently in India support FD-LTE, using the 1800 Mhz band and TD-LTE, on the 2300 MHz band — technologies supported by the likes of Jio and Airtel.

Vodafone and Idea offer 4G services only on the FD-LTE band. But only a few of the 4G devices in the market currently support FDLTE using the 850 MHz band which will be used by Reliance Communications and also by Jio to offer 4G.

Going forward, more phones are expected to support the 850 Mhz band as well.

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4G LTE: How Reliance Jio, Airtel, Vodafone, Idea, Aircel stack up

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While 2015 was the year when major telecom players tried to set the base for 4G penetration in India, 2016 promises to be the year where the telecom operators would look to consolidate their presence and positioning in the Indian 4G market.
While Mukesh Ambani-owned Reliance Jio has as of today the capability of providing 4G services across all 22 circles in India, Bharti Airtel can provide it in 15, Idea in 10 and Vodafone in 5 circles.
Though the core addressable market for 4G is still very small, it is expected to grow strongly in coming years, with the 82 million 3G users being the primary target customer base for this service.

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One of the biggest and definitely the most disruptive player, which is expected to be in the Indian 4G market this year, is Reliance Jio.
Though Jio was widely expected to start operation by the middle of last year, it officially made a soft-launch of its services for its employees and their families on December 27, 2015 . The company is widely expected to launch commercially around April this year.
The Jio management though hasn't announced any specific date for launch of services and has said it would wait for staff feedback on the beta version to take a call on network capability before proceeding with full commercial rollout.
In this age of perception, Jio has been planning to position itself as a digital content company to make it distinct from other mobile phone operators in an intensely competitive market, with content streaming packages a key element of this strategy.
Reliance Jio 4G broadband services will offer not just data and voice services but also peripheral services like live TV, movies on demand, news, streaming music and digital payment platforms. With its multi-service operator (MSO) license, Jio will also serve as a TV channel distributor and will offer television-on-demand on its network.
Although, Jio has had pan-India 4G airwaves in the 2300 MHz band since 2010, it hasn't launched commercial services to date mainly due to the technological limitations of the 2300 Mhz airwaves and an under-developed handset ecosystem.
To enhance its pan -India 4G presence, Jio recently got into a spectrum sharing deal with his younger brother Anil Ambani-backed Reliance Communications. The deal ensured that Jio has got access to spectrum in the 800 MHz bands in 7 more circles on top of the 10 it ha s already won in auctions. Besides, it also has 1800 Mhz airwaves in 14 circles. Both 800 Mhz and 1800 Mhz bands can be used for 4G services as well.
Once commercially rolled out, Jio's performance will be keenly observed by the industry as it could potentially re-define the telecom space of the Indian telecom market.

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Bharti Airtel has led the 4G story in India, having launched India's first 4G network in Kolkata in April 2012. It has rolled out 4G services in 15 circles, spanning over 350 towns in the country.
The telco seeks to leverage its first mover advantage to consolidate its high-speed broadband spectrum holdings ahead of an expected battle over data services with Reliance Jio. It had earlier acquired Qualcomm's airwaves in 4 circles.
Very recently, Airtel also acquired Augere Wireless which owned 4G airwaves in the Chhattisgarh-Madhya Pradesh circle. Though Airtel didn't disclose the financial terms those with knowledge of the deal put the value of Augere's airwaves at close to Rs 150 crore.
To provide impetus to its 4G services, Airtel has also tied up with e-commerce giant Flipkart and smartphone market leader Samsung for marketing initiatives.
Airtel has also extended 4G services up to 15 km into the sea, making connectivity faster for naval personnel, following a request by the Indian Navy. This would facilitate easier communication among naval personnel from different countries on board several warships off the coast.
Considering all the strategic investments made by Airtel, it's pretty much evident that it will continue to be a critical clog in India's 4G story.

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Vodafone India, the country's second largest telco, introduced high-speed 4G services in five circles of Kerala, Karnataka, Mumbai, Delhi & NCR and Kolkata, which today contribute 30% of industry revenue and close to 50% of Vodafone India data revenue.
With the initial 5 circles covered, the company has plans to play a wait and watch game, and make a complete 4G commercial rollout in the remaining 17 circles after sufficient 4G traction is seen in those markets.
The company would till then focus on its 3G offerings for these circles.
While Vodafone looks to consolidate its position in the Indian 4G market in a conservative manner, it needs to strongly guard itself against Reliance Jio's foray into this market. Analysts strongly believe that due to its comparatively limited 4G spectrum holdings, Vodafone's market share will be more vulnerable to Reliance Jio's pan-India service offerings than Airtel's and Idea's.

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Idea's 4G LTE services is currently available across 183 towns in 7 telecom service areas as of January, 2016. The country's third largest telco by subscribers has expanded its 4G footprint with the launch of services across three telecom circles of Haryana, Punjab and Madhya Pradesh & Chhattisgarh in January this year. While doing so, it became the first mobile telecom operator to offer latest 4G services in MPCG circle.
Prior to that it had launched 4G services across 4 telecom circles of South India, namely Andhra Pradesh & Telangana, Karnataka, Kerala and Tamil Nadu & Chennai, in December last year.
The telco has 2.7 million customers owning 4G devices, nearly 4% of its subscriber base in these 7 telecom service areas, registered on its network. In comparison, on an all India basis, Idea has nearly 49.5 million customers owning 3G devices.
As part of its 4G expansion plan, Idea Cellular plans to extend 4G services to 3 more key markets namely, Maharashtra & Goa, North East and Orissa by March 2016. By June 2016, Idea's 4G footprint is expected to cover 750 cities across 10 telecom circles.
Idea Cellular currently holds 1800 MHz 4G spectrum in these 10 telecom circles which cover 50% of telecom market but over 60% of Idea's gross revenue.
A recent agreement with Videocon Telecommunications for buying the latter's 1800 MHz spectrum in two of its key telecom leadership markets of Gujarat and Uttar Pradesh (West) will further expand Idea's 4G services to 12 service areas, covering 75% of Idea's revenue base in the country.

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Aircel, the Chennai-headquartered company, holds 20 MHz of spectrum in the 2300 MHz (4G) band across Andhra Pradesh, Tamil Nadu, West Bengal, Bihar, Odisha, Assam, the North East and Jammu & Kashmir. It commercially launched 4G services in six of the eight circles for its enterprise customers.
The telco is currently in talks with Anil Ambani's Reliance Communications for a merger to create a larger wireless entity.

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Having failed to buy fresh 4G airwaves, analysts expect Telenor to step up 4G-related spectrum spending to overcome the paucity of its data bandwidth holdings and limited geographical presence.
The Norwegian carrier has also been reported to be in talks with Videocon to buy its 4G spectrum.
While Telenor is interested in buying the airwaves in Uttar Pradesh (East), Bihar, Madhya Pradesh and Haryana to give boost to its 4G expansion plans, Videocon Telecom Ltd (VTL) is said to be interested in selling off just the UP (East) and Bihar airwaves, while retaining the more lucrative Madhya Pradesh and Haryana with itself. The discussions are still on.
Telenor was even keen to buy the UP (west) and Gujarat airwaves from Videocon but eventually lost out to Idea Cellular.

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MTS India, the pure play CDMA telco, is in the process of merging into into Reliance Communications. The deal could be a win-win scenario for both operators as they could pool its spectrum to start 4G services on liberalized spectrum while retaining its CDMA service on un-liberalized spectrum.

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The Tata Group Company currently doesn't offer 4G services in India, but possesses spectrum in 800 MHz band in Andhra Pradesh, Delhi, Mumbai and Maharashtra, which it can utilize for providing 4G services in future after liberalizing it by paying fee to the telecom department (DoT).

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Tikona Digital Networks which had earlier plans to launch 4G-LTE based broadband services in 30 cities across five telecom circles during the first half of 2016, seems to be making a strategic shift lately.
As per reports, it is in talk with Vodafone India for selling off its 4G spectrum in 2300 MHz band in Gujarat, Himachal Pradesh, UP (East), UP (West) and Rajasthan circles.
While, this would not only allow Vodafone to foray into the 2300 MHz space (it currently operates in only 1800 MHz space), it would also help Vodafone double its geographical 4G presence, making it better placed to take on its rivals Bharti Airtel, Idea Cellular and Reliance Jio.

Jio’s Rs 2,399 annual plan offers 2GB per day data that costs effectively Rs 200 per month. It also offers unlimited voice and SMS. Airtel and Vodafone Idea’s Rs 2398 and Rs 2399 annual plans, on the other hand, offer 1.5GB per day data along with unlimited voice and SMS